Correlation Between Ero Copper and Freeport McMoran
Can any of the company-specific risk be diversified away by investing in both Ero Copper and Freeport McMoran at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ero Copper and Freeport McMoran into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ero Copper Corp and Freeport McMoran Copper Gold, you can compare the effects of market volatilities on Ero Copper and Freeport McMoran and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ero Copper with a short position of Freeport McMoran. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ero Copper and Freeport McMoran.
Diversification Opportunities for Ero Copper and Freeport McMoran
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ero and Freeport is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ero Copper Corp and Freeport McMoran Copper Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoran Copper and Ero Copper is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ero Copper Corp are associated (or correlated) with Freeport McMoran. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoran Copper has no effect on the direction of Ero Copper i.e., Ero Copper and Freeport McMoran go up and down completely randomly.
Pair Corralation between Ero Copper and Freeport McMoran
Considering the 90-day investment horizon Ero Copper Corp is expected to generate 1.42 times more return on investment than Freeport McMoran. However, Ero Copper is 1.42 times more volatile than Freeport McMoran Copper Gold. It trades about 0.05 of its potential returns per unit of risk. Freeport McMoran Copper Gold is currently generating about 0.04 per unit of risk. If you would invest 1,249 in Ero Copper Corp on August 24, 2024 and sell it today you would earn a total of 340.00 from holding Ero Copper Corp or generate 27.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ero Copper Corp vs. Freeport McMoran Copper Gold
Performance |
| Timeline |
| Ero Copper Corp |
| Freeport McMoran Copper |
Ero Copper and Freeport McMoran Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ero Copper and Freeport McMoran
The main advantage of trading using opposite Ero Copper and Freeport McMoran positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ero Copper position performs unexpectedly, Freeport McMoran can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Freeport McMoran will offset losses from the drop in Freeport McMoran's long position.| Ero Copper vs. Freeport McMoran Copper Gold | Ero Copper vs. Amerigo Resources | Ero Copper vs. Hudbay Minerals | Ero Copper vs. Capstone Copper Corp |
| Freeport McMoran vs. Ero Copper Corp | Freeport McMoran vs. Amerigo Resources | Freeport McMoran vs. Hudbay Minerals | Freeport McMoran vs. Southern Copper |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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